Funding Circle Cuts Forecast Returns for Retail Investors

Recently listed small business lender Funding Circle has cut expected returns for its UK retail investors after raising its estimate of defaults, the Financial Times reported. A higher risk of default on UK and US loans made in 2017 and 2018 has prompted the lender, which matches individual and institutional investors with small business borrowers, to revise down its predicted returns and tighten its lending criteria. Peer-to-peer lenders have attracted investors who are looking for better returns than high street banks can offer. But they risk losing their capital if the loans go bad. Funding Circle and other such lenders seek to limit that risk by creating portfolios of loans spread across different businesses and allowing customers to choose between a higher and lower risk option. For Funding Circle’s higher risk option, returns for UK retail investors are now expected to be between 4.5 and 6.5 per cent, down from the 5.5 to 6.5 per cent predicted in February. Read more